The real George Osborne

He is the unashamedly privileged chancellor who convinced the country of the need for austerity cuts. But with his poll ratings sinking and the public-sector in revolt, is George Osborne's credit running out?

A lot of people don't like George Osborne. "He looks permanently pink and facetious, as though life is one big public-school prank," writes the former Labour MP Chris Mullin, usually quite forgiving towards Tories, in his diaries for December 2010. In October 2008, he finds Osborne "perpetually smirking"; in November 2007, "as ever... obnoxious".

Three years ago, the rightwing columnist Simon Heffer wrote of the future chancellor: "George has poor judgment. George is unreliable... untrustworthy... to coin a phrase, a dolt." The same year, Alistair Darling, the mild-mannered then chancellor, described Osborne as "someone who conceals cynical opportunism with a pretty thin veneer of abuse". In 2009 Vince Cable, now the business secretary and, however hard he strains to hide it, an uncomfortable colleague of Osborne's, included a memorably double-edged portrait in his memoirs: "I have never rated George's understanding of financial and economic matters, but he is a political operator of some substance."

Osborne's biographer, Janan Ganesh, political correspondent of the Economist, says: "A lot of Tories haven't forgiven him for not cutting taxes." The prominent Tory activist and blogger Tim Montgomerie says: "There are probably only three or four columnists in the whole of Fleet Street who are Osbornites."

Over the past 12 months, the chancellor's poll ratings have sunk, as Britain has slipped from tentative recovery back to stagnation and probable slump, a deterioration confirmed yesterday by the Organisation for Economic Cooperation and Development, which predicted that the British economy will shrink in the current quarter and again in the first three months of 2012. According to Ipsos-Mori, they are already almost as low as those of chancellors Brown and Darling at the fag end of the last Labour government. On the internet, on anti-government demonstrations, wherever opponents of the coalition gather, the mere mention of Osborne gets an instant reaction. His face, his voice, his manner, his background, his political methods, his policies: he provokes in ways that David Cameron, so far at least, does not.

Today, when he delivers his exhaustively trailed autumn statement on the economy, and tomorrow, when possibly the biggest strike since the 20s is expected in response to his public-spending cuts, there should be plenty of opportunities for the Osborne-haters. The architect of our current austerity is, as Ganesh puts it, "conspicuously privileged": heir to the Anglo-Irish baronetcy of Ballintaylor and Ballylemon, created by Charles I in 1629; holder of a 15% stake in the upmarket wallpaper family firm Osborne & Little, a company worth – press estimates vary – between £15m and more than £30m; and son-in-law of the Tory peer, Lord Howell.

Other provocative CV details include: recommending Andy Coulson as his party's director of communications; membership of the infamous Bullingdon Club at Oxford; an unashamedly prosperous private life including the use of an elite private bank, private primary school for his children, and the regal Swiss ski resort of Klosters; and, most notoriously, a murky 2008 episode in Corfu, involving Osborne, the even more sharp-clawed, Labour politician Peter Mandelson, the tycoons Nathaniel Rothschild and Oleg Deripaska, and allegations of malicious gossip and the soliciting of an illegal donation to the Conservatives.

Osborne denied the latter. But he admitted afterwards that the Corfu incident "didn't look very good". Yet unlike his fellow ex-Bullingdon men and Tory patricians, Cameron and London mayor Boris Johnson, Osborne does not make a consistent effort to play down his privilege or make it endearing. "He is very reluctant to ever compromise his life for the sake of his image," says Ganesh. At least in public, Osborne is always confident, often to the point of arrogance; frequently dismissive and taunting towards opponents; and sometimes openly cruel and pleased with himself. Interviewed about the cuts and the economic outlook on the Andrew Marr Show on BBC1 on Sunday, Osborne looked grim and statesmanlike in repose – he has grown fleshier in office – but every time he began to speak his dimpled mouth formed a half-smile and his quick eyes were almost merry. Like a debating society star who thinks he is winning an argument, Osborne was transparently enjoying himself.

In the Commons, he is often highly effective. But sometimes he "crosses a line," says a frequent Labour adversary. "The unnecessarily harsh put-down – people remember that." Ganesh says: "Osborne thinks that if you are magnanimous, if you give your opponent credit, there are no rewards."

Since 2005, when he became shadow chancellor at the precocious age of 33, he has given more hostages to fortune than perhaps any other current British politician. "Under a Conservative government there will be real increases in spending on public services, year after year," he wrote in the Times in September 2007. "The charge from our opponents that we will cut services [is] transparently false." Last April he told the same paper, "We have no plans to increase VAT." Last October, he told the Commons that "fairness" would be a central principle of his spending cuts: "We are all in this together." In the same speech, he promised "to eliminate the structural deficit... [and set] national debt falling as a proportion of national income... We will achieve both these objectives... in 2014-15." After only five months in office, he concluded: "The action we have taken... has taken Britain out of the financial danger zone."

This year, as VAT has risen and the cuts have bitten; as unemployment has surged and growth has dwindled; as inflation has swelled and real incomes have shrivelled; as the FTSE index has shuddered and a fog of financial anxiety has settled; as the banks have failed to lend and the euro crisis has deepened; as the City of London has continued to lord it over manufacturing despite Osborne's talk of economic "rebalancing"; as historians have had to look further and further back – to the early 80s, the mid-70s, the 30s, the 1870s – to find a comparably grim economic era; so his cockiness and large claims have come to look more and more misplaced. Last week, an editorial in the Financial Times, while still broadly supportive of his cuts, concluded that his structural deficit reduction target "now look[s] impossible. Meeting this target in the fallback year of 2015-6 also now looks improbable. Most likely, the target will be reached only in 2016-17." In an accompanying article ranking the performances this year of the EU's 19 finance ministers – not exactly the stiffest competition – Osborne was placed seventh, and fifteenth for his economic achievements. "His reputation," concluded the FT, "has teetered."

Other critics are less equivocal. "He's cornered," says the former Bank of England economist David Blanchflower. "The government's growth strategy is in disarray. They just haven't realised it yet. Look at their excuses for the collapse in growth: it was Labour's fault. It was the weather [last winter]. It was the royal wedding – all the extra bank holidays then. Now it's the euro crisis. There comes a point at which you have to own the crisis. It becomes yours [as chancellor]." Last month, 100 other economists – some, but not all of them, left-leaning like Blanchflower – signed a letter to this paper urging Osborne to abandon his cuts strategy.

A rightwing critique of his policies has also been crystallising. Montgomerie calls Osborne's approach "all goalkeeper and no striker": deficit reduction requires growth, to generate tax revenue, as well as cuts. Last month the Spectator, usually strongly loyal to the government, announced a competition: "A bottle of Pol Roger, our house champagne, to whoever can explain George Osborne's growth strategy."

And yet, for all the mockery and fury he attracts, Osborne has a grip on British politics. "He is the dominant figure in the government," says Montgomerie. "He takes the big decisions, and the government works to his timetable." Cameron, like Tony Blair as prime minister, might be the administration's more charismatic, more public face; but Osborne, some Tories whisper, is like chancellor Gordon Brown, minus the rivalrous instincts and burning prime ministerial ambitions: roaming across Whitehall, disciplining government departments, worrying about the long term.

In the so-called "quad" of ministers that steers the coalition – Cameron, Osborne, Nick Clegg and the Lib Dem chief secretary to the treasury Danny Alexander – "Most of the political thinking is done by Osborne," says Ganesh. "His gift is for being able to see round corners. He is very vigilant of any political danger. He has a fascination with newspapers – he is probably better than anyone in Tory circles at knowing how to pitch a story – and he is a very assiduous student of other parties." As shadow chancellor, while many commentators were patronising him as "Boy George", he used this feel for the game of politics, and his needling, nimble Commons style, to steadily undermine chancellor Brown, who had previously seemed impregnable to Tory attack. Seven months before Cameron became leader, Osborne was already changing the political weather.

In important ways, he still sets the national agenda. Despite 18 months of his misfiring policies, most polls show the public continue to accept his relentless argument that the last Labour government, more than anything else, is responsible for Britain's economic troubles. More voters than not still agree with another key claim of his, that drastic public-sector cuts are an immediate necessity; and rank the Conservatives ahead of Labour for economic competence.

Carl Emmerson, of the Institute for Fiscal Studies, says: "Quite a bit of what Osborne wants to do, he's already pulled it off. Spending cuts in all the government departments are running slightly ahead of schedule. Public-sector job cuts are ahead of schedule. His tax rises are in the bank." Last week, the British government's borrowing costs even briefly fell below Germany's, providing useful backing for Osborne's other favourite assertion, that in the current global storm Britain is seen by investors a "safe haven".

Geoffrey Howe, another radical rightwing chancellor in challenging times under Margaret Thatcher between 1979 and 1983, says: "George has handled the Treasury well." And unlike then, Howe points out, Osborne has broad cabinet backing for his policies. Howe's successor Nigel Lawson, also a pivotal Tory chancellor, says: "George has grown enormously in stature. He has a clear sense of direction. He is very political. He's being pulled both ways, by those who say he must have a slower, Keynesian approach to the deficit, and those who want a tougher squeeze. But that puts him in a politically quite convenient middle position."

British chancellors are rarely popular for long. Some argue that they have responsibility without real power: "Governments no longer control economies," says Denis Healey, Labour chancellor in the 70s when the financial markets and the International Monetary Fund forced the Callaghan government to tack abruptly rightwards. How does he rate Osborne's performance? "I think he does it quite well. He's not outstanding."

Osborne sometimes meets with Howe and Lawson. But Lawson retains a certain objectivity: "The deficit reduction falling behind schedule – it's not good news for him," he says. "It is politically difficult. I don't think we're looking at the economy falling off a cliff. What we're looking at is a prolonged period of very low growth indeed." Professor Nicholas Crafts of Warwick University, one of the foremost historians of the British economy, is even bleaker: "The British economy is entering unknown territory for the modern democratic era."

Born Gideon Oliver Osborne

As with Cameron, Osborne's preparation for these perilous times has been patchy. He was born Gideon Oliver Osborne in 1971, and grew up in Notting Hill in west London, as the famous stucco inner suburb steadily metamorphosed from rundown immigrant quarter and squatters' paradise into a sloane heartland. Sympathetic profile-writers, and Osborne himself, play up his family's urban bohemianism and political adventurousness: his mother supported Amnesty International and opposed the Vietnam war, his father voted for several parties, and set up his wallpaper business in their kitchen, designing fabrics that were part aristocratic, part psychedelic.

But the contrast with more predictably grand Tory upbringings – "There was no family stately home," Osborne told the Times in 2006 – can be exaggerated. His mother switched to supporting the Conservatives in 1975. From the start, he went to private school. And away from Notting Hill's buffed-up crescents and private communal gardens – a self-contained world Osborne has lived in ever since – his family also had a large country property in Berkshire, the Vinnicks, with swimming pool and tennis court, which they sold in 2003, reportedly for £3m. Cameron, supposedly a very different sort of Tory, grew up in similar circumstances close by.

Osborne was the oldest and most sensible of four brothers. At St Paul's, his cosmopolitan London secondary school, "He was a bit of a swot and unusually grown up," says Ganesh. At 14, he changed his first name to George: "I couldn't think of anyone who I liked or who was successful who was called Gideon," he told the London Evening Standard in 2005.

At Oxford, similarly, his behaviour was more sober than his Bullingdon membership suggests: present for beery high jinks, but not necessarily an enthusiastic participant. "He's quite straight," says Ganesh. "His natural setting is to be a bit reserved. Whenever anything outrageous is taking place [in his Oxford years], he's a bit cowed by it." A contemporary at his then left-leaning Oxford college, Magdalen, remembers him as "a Tory Boy – you could just tell", who grew his hair long in the early-90s rave style, and "really wanted to be part of the gang that liked the Happy Mondays", but ended up sitting in a corner of the college bar with a group of other, slightly marginalised Tory Boys from smart families. "They used to sneer at us, and we at them."

Osborne studied modern history, not economics, and got a 2:1. He was not very active politically, but "current affairs", as he more dispassionately called it, had come to fascinate him and he left university with "a hunger to be involved in the game in some way," Ganesh says. The Conservatives had just won the 1992 general election and seemed as if they would be in power for ever, but Osborne tried journalism first instead. In 1993, he just failed to get a sought-after place on the Times's trainee scheme, and settled instead for freelance work on the Daily Telegraph's Peterborough diary column, a famous nursery for well-connected young journalists.

He did not stay there long. A friend who had been working at Conservative central office alerted him to a vacancy for a researcher there. Over the next four years, Osborne experienced the collapse of the Tory ascendancy first hand: "I joined the party the week Back to Basics fell apart," he told the Times in 2005. "I worked in the ministry of agriculture when BSE hit. I was on John Major's [general election] campaign team in 1997." Struggling institutions are often good places for able apprentices, and Osborne was given tasks that were increasingly high-status and formative. One was to go the Labour conference as an observer in 1994, with Blair newly elected leader. Osborne was dazzled, and remains an admirer of the peaktime Blair's mixture of adroit political positioning, free-market reform at home and muscular liberalism abroad.

'He's an extreme pragmatist'

"The perception of the public and of many journalists is that Osborne is the most ideological member of the government. I think the exact opposite," says Ganesh. "He's an extreme pragmatist, less ideological even than David Cameron." After the Tories' 1997 election disaster, he considered journalism again, approaching the Times to be a leader writer. Nothing came of it, and instead he became an aide and speechwriter for the beleaguered new Tory leader William Hague. To prepare Hague for prime minister's questions, Osborne played the part of Blair. The aggression and relentlessness with which Blair and Brown harried the Conservatives during the 90s left a lasting impression on Osborne. He would adopt their methods – and he would get even.

In 1999, he was selected as Tory candidate for Tatton, a glossy piece of Cheshire commuter belt that was usually one of the safest Conservative seats in the country. The anti-sleaze independent Martin Bell had won it in 1997, but had pledged to stand down after one term. Osborne lunched Bell at regular intervals to make sure he intended to keep his promise. Bell remembers Osborne exuding charm and just a hint of menace: "George had a lovely word. He said if he stood against me, it would be 'messy'."

Again like Brown, Osborne was for a period the sharp-elbowed young frontrunner for party leader, before a more decisive, more voter-friendly close ally took the prize. Cameron and Osborne had become friends as rising new MPs: "We used to bicycle back home [together] from the House of Commons," Cameron told the author Dylan Jones in 2007. Their favourite topic was "what was wrong with the party". Osborne, more socially liberal and with more understanding of the Tories' struggles in the late 90s (when Cameron had largely left politics to work in public relations), had become a party "moderniser" several years before Cameron. In 2005, Osborne was the then party leader Michael Howard's preferred successor. But after 10 days' deliberation and consultation with colleagues and conversations with Cameron – the content of all of which may one day be as closely raked over as the famous Blair-Brown deal – Osborne announced he would not run for leader. At 33, five years younger than Cameron, he reportedly felt he was too young.

Or it may be that Osborne is not quite as confident as he looks. "He understands that the public see him as privileged, aloof, that they don't like him as a person," says Ganesh. "One of the ways he handles it is by not being very visible. He enjoys the big set-piece occasions when he totally controls the terms of the debate, but he avoids more spontaneous appearances." On Andrew Marr on Sunday, when the shadow chancellor Ed Balls joined Osborne on the sofa and paid him some unexpected, possibly mischievous minor compliments, the chancellor sat stiff and suddenly tongue-tied. For someone talked up as a future Tory leader and prime minister, succeeding Cameron some time before the 2020 general election, Osborne's interpersonal skills can seem ominously Brown-like.

In less public situations, Osborne relates to people better. "He's a temperate personality," says Ganesh. "He's never very angry, or sad or euphoric." Montgomerie says: "I've always found George easier and more interesting to talk to than Cameron. He listens. He's got a court. George does decide that if you're one of his people, he'll go the extra mile to look after you, and people who have worked for him have extraordinary devotion. The public would find this startling." A former Labour minister says: "Within the Treasury he is well regarded: as someone who knows his mind, as a good operator."

That has not always been the case, though. For much of his time as shadow chancellor, Osborne was widely thought to be out of his depth. Until December 2008, well into the financial crisis, he made almost no criticism of Labour's public spending increases – "He and David Cameron got it completely wrong," says Lawson – then abruptly announced they were unsustainable. On other occasions, Osborne seemed partisan to a fault, opposing the nationalisation of Northern Rock, for example, as a "back to the 1970s" leftwing Labour policy, when commentators of all persuasions supported it as a pragmatic emergency measure. The 2009 appointment of the worldly former chancellor Ken Clarke as shadow business secretary was a humiliation of sorts: an admission by the Conservatives, it seemed, that Osborne lacked a certain experience and judgment.

The Corfu affair also fed that impression. Osborne, it appeared, had been outmanoeuvred by Mandelson (who denied the allegation that he had "dripped pure poison" about Brown into the ear of the shadow chancellor), and by Rothschild (furious that Osborne had used their private gatherings for public political advantage, and who made his fundraising allegations against the Tories in response). Back in blustery England, a windswept Osborne was mobbed by reporters in the car park of Conservative headquarters, and gave a less than composed interview, eyes bulging and head lunging. For several days, his whole career seemed in danger.

He survived. But a sense remains that, as a former Labour minister puts it, "Sometimes he can be too clever for his own good." In 2009, despite the financial crisis, he reportedly told a private meeting in the city of London that only "40% of my time is spent on economics".

"Economics is not his love," Montgomerie says. "His love is politics." Blanchflower says: "We've got a part-time chancellor facing a once-in-a-hundred years economic event." Osborne, it increasingly seems, has the same strengths and weaknesses as the government as a whole: a flair for presentation, and for framing issues, while vital in opposition, is less of a trump card in office, especially in hard times, when concrete achievements can be measured, sometimes by the voters themselves. A shut-down library is a shut-down library, however you spin it.

And unlike previous radical chancellors, Osborne does not have a strong intellectual tide running in his favour. "What we did was a revolution," says Lawson, referring to the decades of new rightwing thought that flowed into Thatcherism. "George hasn't had to do that." The government austerity currently in fashion around the world feels more like a panicked response than an international movement.

Deep down, does Osborne even believe in the cuts himself? "If you said to him, 'Design your ideal country,'" says Ganesh, "He would say, 'Small state. Low taxation'." But Ganesh also points out Osborne's enthusiasm for high-speed trains and other large state-connected infrastructure projects. Osborne's sudden turn against public spending three years ago, says Ganesh, was driven more by a desire to "save the country" than by any personal philosophy. Faced with the realities of Britain's rickety finances, chancellors and shadow chancellors of all parties have frequently turned parsimonious.

Some City figures who used to mock "Boy George" revere him now. David Buik of the brokers BGC Partners says: "He's a fast learner. His arrogance, his slightly sneering look, gives him the aura that is required. He doesn't give a damn about being liked. For him, it's just politics and the kids."

Osborne has two children, aged eight and 10, whom he does not show off in public. His off-duty interests – opera, galleries – have less of a populist tinge than Cameron's. Osborne's wife, Frances Osborne, is a successful biographer, and soon-to-be novelist, who writes about her racy ancestors and aristocratic life in general without much critical distance.

Could her husband really be prime minister? He is not much of an orator yet, with his rigid onstage posture and ponderous catchphrases – "Together. We. Will. Ride. Out. The. Storm," he told this year's Tory conference. But he is a lucky politician: lucky that Nick Clegg is even more disliked, that Labour are still tentative, that the euro crisis came along just as his cuts rationale was starting to unravel. None of these will divert attention from his policies for ever, though, and in the case of the euro crisis, will ultimately make his job harder, by stunting demand for British exports.

If, as seems highly likely, Osborne does not meet his deficit targets by the general election, remaining chancellor may be a difficult prospect. "The government haven't prepared the public for what happens if [in a second term] they have to come back for more cuts," says Emmerson. Osborne is said to have organised the more effective parts of the Conservatives' last general election effort, such as the orchestrated attack by business leaders on Labour, but a cuts-based campaign for 2015 as well would tax even his presentational powers.

Were the Conservatives to lose in 2015, as few commentators expect but the polls suggest is quite possible, Osborne may do something surprising. His professional life so far has been punctuated by swerves and U-turns, and he will only be 43. "He is part of the first generation of politicians who see politics as just one stage in their careers," says Ganesh. "He can walk away, make money. Or one of his interests is ultimately to go to America: be a political consultant, or teach politics."

"Early life can be gilded not just by overt privilege," wrote Frances in a book review for Vogue in 2008, "But simply by the possibilities with which it burgeons, and which, as we age, slip through our fingers."